Why Ford is more profitable than GM.

Nikked · 07-11-2012, 05:16 PM

Quote:

DETROIT -- It has been more than three years since General Motors emerged from bankruptcy liberated from much of its bloated cost structure. So why is GM still far less profitable than archrival Ford Motor Co. in the bread-and-butter North American market?

An equity analyst sprang that question on GM's top brass last week during its third-quarter earnings conference call (albeit worded a bit more diplomatically). He got a refreshingly candid answer.

Chuck Stevens, GM's CFO for North America, laid out a few key reasons why GM's pretax profit margin of 7.8 percent in North America lagged Ford's 11.9 percent.

"We have a clear understanding of the gap," Stevens says. "We know what we have to do to close it."

Here's how he sizes it up:

1. Product cycle

GM's most profitable vehicle lines are also its oldest: full-sized pickups and SUVs that analysts say carry profits of more than $10,000 per unit. That helps the much-fresher Ford F series garner an average transaction price of as much as $1,000 more than the Chevy Silverado.

GM's answer: It will go from having "the oldest portfolio in North America to the freshest" over the next two years, Stevens says, with redesigns or freshenings of vehicles that account for about 70 percent of GM's U.S. volume.

That includes those long-in-the-tooth pickups and SUVs. Stevens expects "at a minimum" to erase that $1,000 pricing gap when the next-gen pickups are launched, which is expected by the summer.

2. Global platforms

Stevens says Ford is about two years ahead of GM on its move to global platforms, which cuts engineering and purchasing costs, thus boosting profitability.

GM's answer: By 2018, it expects to get 90 percent of its sales volume globally from vehicles made on about 14 "core" vehicle platforms. That would put GM's platform structure roughly on par with rivals Ford and Volkswagen Group.

3. Fixed costs

GM still hasn't done enough to whack away at its cost structure. GM CEO Dan Akerson is accelerating those efforts, though. GM is consolidating outside marketing firms and taking information-technology programs in-house to cut costs longer term, for example.

Akerson labels those more-mundane measures "taking complexity out of the business." It's a chore that is as obviously necessary at GM as it is daunting.

But the real key to erasing the profit gap with its archrival, GM execs know, returns to a truism of the auto industry: It's all about the product.

Get the next-gen trucks right, and GM can sell more of them for higher prices. Ditto for GM's new Cadillac nameplates, for example, and the redesigned Chevy Impala due out early next year.

"The first and most important" step, Stevens acknowledges, "will be the product launch cadence."

You can reach Mike Colias at mcolias@crain.com.

Autonews

Food for thought.

jpd80 · 07-11-2012, 07:17 PM

It's much simpler than that, Ford has basically two brands, Ford and the captive Lincoln luxury brand,
the scales of economy possible with only one brand and a luxury sharing unseen parts is much greater
than GM which has Chevrolet, Buick, Cadillac, Vauxhall, Opel, Daewoo, Holden ect ect ect..
All of those brands require specific identities and additional engineering costs to give differentiation.

There is no way that GM can ever emulate the internal savings achieved by Ford, the best it can hope for
is continued huge sales of Buick in China and heady sales of Cadillac around the globe in pursuit of BMW.

Nikked · 07-11-2012, 07:30 PM

Yes, either way, its interesting that GM admit that Ford is a benchmark of sorts.

Dr Smith · 07-11-2012, 07:36 PM

One benefit of getting into financial trouble earlier and then more importantly putting into place the best people, sufficient effort and determination to get out of it on their own by building good product.

flappist · 07-11-2012, 09:36 PM

What?

You mean that spending $gazillions on TV advertising, offering sportwagons and cheap large capacity N/A V8s and buying market share by constantly discounting actually does not make money?

Whoda thunk...........

I wonder if this is why bogans and school kids don't run businesses.......

Brazen · 07-11-2012, 09:40 PM

Quote:

Originally Posted by flappist

What?

You mean that spending $gazillions on TV advertising, offering sportwagons and cheap large capacity N/A V8s and buying market share by constantly discounting actually does not make money?

Whoda thunk...........

I wonder if this is why bogans and school kids don't run businesses.......

Last year Holden put out a sizeable profit and Ford Australia a record loss. Whoda thunk right?

Road_Warrior · 07-11-2012, 11:55 PM

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Originally Posted by Brazen

Last year Holden put out a sizeable profit and Ford Australia a record loss. Whoda thunk right?

Holden this, Holden that

:

Brazen · 08-11-2012, 08:41 AM

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Originally Posted by Road_Warrior

Holden this, Holden that

:

Look at who brought up Holden on this thread with comments directed at people like myself who have proclaimed that Ford need to offer premium engines like V8s if they are going to continue charging premium prices and have also said that people want more versatility than a sedan only range.

I love my Falcon, but I love being correct more. There is a new dull boring Ford circlejerk Forum I have stumbled across on the net recently, so I know I'm in the minority.

prydey · 08-11-2012, 08:55 AM

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Originally Posted by Brazen

but I love being correct more.

funny that, because FORD believe they are correct and i'd suggest they have a lot more info and expertise at their disposal than yourself!!

**Dave R** · 07-11-2012, 09:45 PM

Quote:

Originally Posted by flappist

What?

You mean that spending $gazillions on TV advertising, offering sportwagons and cheap large capacity N/A V8s and buying market share by constantly discounting actually does not make money?

Whoda thunk...........

I wonder if this is why bogans and school kids don't run businesses.......

Apparently it does, as Holden is profitable. The article is also based on the North American market, Australia does not come into the equation.

flappist · 07-11-2012, 11:51 PM

You mean the $112 million profit after the 5 consecutive years of losses totaling $579 million?

As opposed to Ford who while losing $290 million have previously had several years of profit AND invested 1,700 million into R&D which might be why Australian designed and developed Falcon and Territory have lots of world class engines some of which were also designed and built in Australia not unpacked from a crate.

T4ME · 08-11-2012, 10:22 AM

Quote:

Originally Posted by flappist

You mean the $112 million profit after the 5 consecutive years of losses totaling $579 million?

As opposed to Ford who while losing $290 million have previously had several years of profit AND invested 1,700 million into R&D which might be why Australian designed and developed Falcon and Territory have lots of world class engines some of which were also designed and built in Australia not unpacked from a crate.

........but still can't make a car that doesn't rust

Def agree with jp.

**Dave R** · 08-11-2012, 02:41 PM

Quote:

Originally Posted by flappist

You mean the $112 million profit after the 5 consecutive years of losses totaling $579 million?

As opposed to Ford who while losing $290 million have previously had several years of profit AND invested 1,700 million into R&D which might be why Australian designed and developed Falcon and Territory have lots of world class engines some of which were also designed and built in Australia not unpacked from a crate.

What a load of garbage. Ford's "several years of profit" refer to insignificant amounts like $13 million in 2009 and $25 million in 2010. The rest were losses. If you want to look at the last 5 years, here's how it really looks:

2007 through 2011:
GM Holden: net loss of 85 million.
Ford Australia: net loss of 613 million.

And world class engines? It's okay when Ford crates in motors like EcoBoost and the 2.7 TDCi, but not when Holden imports LS motors.

jpd80 · 08-11-2012, 06:13 PM

None of those figures are indicative of the internal debt being run up by both divisions,
Ford preferring to pay down debt instead of adding to the profit column..
Also Ford spending on development costs of T6 SUV, increased R & D facilities...
and Holden with commencement of Cruze production (close to $450 million),
no doubt they have other projects being worked on that we know nothing about..

None of that is meant to throw stones at either manufacturer but to make people realise that by just
looking at "profit", a whole lot of other interesting figures related to expenditure can be easily missed...

1TUFFUTE · 08-11-2012, 06:24 PM

Quote:

Originally Posted by Adrenaline

What a load of garbage. Ford's "several years of profit" refer to insignificant amounts like $13 million in 2009 and $25 million in 2010. The rest were losses. If you want to look at the last 5 years, here's how it really looks:

2007 through 2011:
GM Holden: net loss of 85 million.
Ford Australia: net loss of 613 million.

And world class engines? It's okay when Ford crates in motors like EcoBoost and the 2.7 TDCi, but not when Holden imports LS motors.

ford only JUST started importing those engines here. holden has been importing crate v8s cheaper then they can do the six in a commadore for alooong time. And if ford aus has been building FAR superior cars for along time now...i think THEY have the right to decide the model range here in aus.

As a ford loyalist to the core...i can be proud how ford has survived these hard times the last ten years....with us continuing to get the best models in almost every class. I cant say the same for holden with there rebadged kias, crate v8s and driving dynamically challenged cars like the cruze, commadore 6s and captivas. And theres no reason at all why we cant combine local profits with global profits. We aussies do alot of design and engineering for ford global and are highly restricted to the global market and the ford global plan. Holden on the other hand is LUCKY to hell there parent company was absolved of the billions in dept they had otherwise some chineese company would now be selling zing zang hsvs with more bling then you could imagine. bogans would love it.

**Dave R** · 08-11-2012, 06:39 PM

Quote:

Originally Posted by 1TUFFUTE

ford only JUST started importing those engines here. holden has been importing crate v8s cheaper then they can do the six in a commadore for alooong time.

Does it really matter? Pull apart a current FG Falcon and count the parts that have China stamped on them.

As I said earlier, the article is based on North America and Flappist should have never brought up Australia in the first place.

flappist · 09-11-2012, 02:09 PM

Quote:

Originally Posted by Adrenaline

Does it really matter? Pull apart a current FG Falcon and count the parts that have China stamped on them.

As I said earlier, the article is based on North America and Flappist should have never brought up Australia in the first place.

Yeh, what was I thinking bringing up "Australia" and "Ford" on "Australian Ford Forums".

Of course it did open a window for the usual suspects to jump in and defend their precious holden........

Buntz · 08-11-2012, 06:04 PM

All your ****ing matches are pointless. They have nothing to do with GM and Ford globally. So how's about everyone zip up their flies and talk about the article in the OP.

Everything this GM exec said is all well and good for the investors, partners, and stockholders to hear. But the baseline is, Ford make cars people want to buy, GM do not.

Moby Vic · 09-11-2012, 01:54 PM

I've mentioned this before, but I'll mention it again: When I began my trip to Australia I needed a book to read. On my flight I started reading American Icon: Alan Mulally and the Fight to Save Ford Motor Company, by Bryce Hoffman. I finished it a little over a week into my trip. It's a fascinating book. I'm sure it's available in Australia.

It barely makes a passing mention of Ford of Australia, but it does explain how close the company came to disappearing, and the painful cuts that were made. I think before he was even officially with the company Mulally planned to shed all of Ford's acquired brands.

Buntz · 09-11-2012, 07:07 PM

Quote:

Originally Posted by Moby Vic

I've mentioned this before, but I'll mention it again: When I began my trip to Australia I needed a book to read. On my flight I started reading American Icon: Alan Mulally and the Fight to Save Ford Motor Company, by Bryce Hoffman. I finished it a little over a week into my trip. It's a fascinating book. I'm sure it's available in Australia.

It barely makes a passing mention of Ford of Australia, but it does explain how close the company came to disappearing, and the painful cuts that were made. I think before he was even officially with the company Mulally planned to shed all of Ford's acquired brands.

I wouldn't mind reading that book.